Currency Traders Laugh at Bernanke’s Jackson Hole Jawboning

Currency Traders Laugh at Bernanke’s Jackson Hole Jawboning

In a speech laden with true indecisive “economist-speak”, Fed chairman Bernanke headlined his performance from Jackson Hole with assurance that the Fed “will do all that it can” to keep the economic “recovery” (sarcastic quotes mine) rolling.

From Bloomberg:

Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery and said more securities purchases may be warranted if growth slows.

“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,” the Fed chairman said today in opening remarks to central bankers from around the world at the Kansas City Fed’s annual monetary symposium held in Jackson Hole, Wyoming.

The Fed chairman gave a detailed analysis of the economy and said growth during the past year has been “too slow” and unemployment too high. Still, he said a handoff from fiscal stimulus and inventory re-stocking to consumer spending and business investment “appears to be under way.” He also said that the “preconditions” for a pickup in growth in 2011 “appear to remain in place.”

Bernanke said the risk of an “undesirable rise in inflation or of significant further disinflation seems low.” He said the Fed has several tools if prices decelerate, or job growth stagnates, including shifting the composition of its bond reinvestment strategy.

Stocks bounced after Bernanke’s talk (the S&P is up 14 as I type) – but they had been down for a number of days in a row, and the market appeared to be embracing for the worst.  Reasonably pleased with Bernanke’s comments, stocks rallied, and bonds fell.

Gold traders yawned at the comments, with the bullion sitting unchanged at $1,236.50 (September futures).

More impressively, the dollar is now trading up on the day, as currency traders shrugged off of the latest take from the world’s most famous self-proclaimed money printer.  The old joke about Japan’s Central Bank is that it was so inept, it was unable to destroy its own currency.  Looks like it’s going to take a little more than jawboning from “Helicopter Ben” to send the dollar on the imminent path to destruction that’s anxiously anticipated by the hyperinflation crowd.

And don’t forget, there’s more dissension at the Fed than there has been for some time now.  We’ll see in the months ahead if Bernanke is indeed permitted to do “all that it takes”.